Answered: An inheritance provides you with a…

An inheritance provides you with a $52,000 per year payment for the next 40 years. A 6.00% discount rate, what is the present value of the inheritance? What is the gross amount of the payments?

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter2: Gross Income And Exclusions

Section: Chapter Questions

Problem 14MCQ

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Question

An inheritance provides you with a $52,000 per year payment for the next 40 years. A 6.00% discount rate, what is the present value of the inheritance? What is the gross amount of the payments?

Expert Solution

Step 1

a) Present value annuity (PV) of an inheritance payment (P) of $52,000 for a period (n) of 40 years at a discount rate (r ) of 6.00% is calculated as below:

Answer: Present value of the inheritance is $782,407.44.

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